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Integrated performance management for sustained growth
This paper provides Deloitte’s insights on Integrated Performance Management (IPM).
Organisations that are considering improving reporting, planning, budgeting and forecasting processes, systems and capabilities can benefit from the insights contained in this paper.
It is particularly useful for organisations that are preparing to embark on strategic change programs such as financial transformation, IPO readiness and shared services & BPO.
The key issues contributing to successful implementations are examined, and four key questions are posed and addressed. These questions form the structure of this paper and will guide you on how to approach the deployment of IPM across finance and business change enablement initiatives.
Introduction
Executive summary 1
Background 5 1.1 Our industry observations 5 1.2 Context 6
1 Why is IPM important? 7 1.1 What is Integrated Performance Management 7 1.2 Why take an Integrated Performance Management approach 11 1.3 What are the risks of not taking an IPM approach 11
2 How to implement IPM? 12 2.1 Establishing guiding principles and educating your leaders 12 2.2 The Deloitte IPM Maturity Assessment Tool 13
3 What are the critical success factors for IPM? 16 3.1 Critical enablers 16 3.2 Lessons learnt 17
4 Next steps 18 4.1 Where should you begin 18 4.2 Factors for consideration 19 4.3 What should you do immediately 19
Contents
1
Executive summary
Many companies undertake performance management improvement programs. These programs focus on:•Buildingcapabilitytosupportgrowth•Drivingoperationalefficiency• Improvingdecisionmakingcapability•Drawinginsightsfrombusinessinformation
and processes• Improvingcapabilityformanagement
to drive competitiveness.
These programs typically spark significant change in an organisation and challenge the capability to maintain business as usual whilst also transforming the way the business operates.
History has shown that these programs and projects can suffer massive failure when performance management disciplines, business processes, people and organisational constructs, enabling technology and information fail to align.
Integrated Performance Management (IPM) is an approach constructed on a set of management disciplines and principles, designed to help organisations accelerate desired business outcomes.
Figure 1: The Deloitte IPM wheel
Integrated Performance ManagementIPM is a framework that directs organisations to focus on and assess their current processes and capabilities. It guides the building of a sustainable way of doing the right things in the right way, driving focus and alignment across the organisation. It relies on a strong information and technology foundation and cross functional integration to accurately measure outcomes and reward success.
In essence IPM is an interrelated set of activities, connecting the metrics, processes and systems used to monitor and manage business performance.
The Deloitte IPM approach helps businesses to deliver operational results and business outcomes using an integrated methodology that is enabled by processes, people, technology and information.
IPM helps deliver business outcomes by focussing on nine interconnected management disciplines; enabled by technology and information and driven by people and behaviours.
Measures, dashboards and scorecards underpin each management discipline to allow the business to manage and monitor performance. This provides focus, alignment, integration and behaviour to drive business outcomes
9. Forecasting
1. Strategy
2. Planning
3. Budgeting
4. Operational reporting
5. Management reporting
Business outcomes
6. External reporting
7. Analysis
8. Intervention
Technology
Peo
ple P
rocess
Information
2
Key questions to consider
Question 1: Why is IPM important?IPM establishes a clear framework and set of connections and interdependencies across all work streams associated with business performance management. The framework identifies the pieces of work required to successfully execute the program in full alignment with the expected business outcomes.
Executing a performance management program without an IPM framework, increases the risk that while individual components may succeed, the overall program will not.
Undertaking the program with an IPM framework enables the right activities to be completed, in the right order with full focus, alignment, integration and aligned behaviour across all streams and management disciplines.
Delay in adopting an IPM approach can result in the need to correct misalignment or other issues mid flight, resulting in reduced effectiveness, project blow outs and significant additional costs with reduced benefit to the organisation.
Aligning the organisation minimises the risk of program failure and improves the quality, agility and relevance of business outcomes.
Question 2: How to implement IPM?Aligning multiple streams within the IPM program demands correct organisational focus, alignment, integration and behaviour. Educating your leaders and successfully connecting the required streams of activities is an important initial step.
Leveraging proven IP, experience and leading practices, tailored with industry expertise and deep client relationships, tested through a maturity assessment model, will guide where to start and how to proceed. This will establish the scope, roadmap and dependencies for the performance management program.
Confirming what needs to be measured, and how that measurement occurs at different levels of the business is another important consideration, as well as building understanding of the benefits that will come from each phase of the IPM roadmap.
These programs should also integrate change and strategy leadership to align senior management and ensure talent and desired behaviours are rewarded.
Global experience in IPM projects underpins the Deloitte approach, by bringing clarity around what to do and in what order to build a robust IPM execution program.
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Question 3: What are the critical success factors? An IPM program should start by securing cross functional agreement and alignment from the top. This allows an organisation to lead with focus, achieve alignment and integrate the correct organisational behaviours and structure.
In our experience it is vital is for organisations to instil their own context into the IPM framework, including:• CurrentstatusofIPMprocesses,
people technology and information• AcceptingleadingIPMpracticeinsights
to learn from others who have undertaken this type of activity.
Thus each program becomes a hybrid of (re)deployment of existing IPM components, and investment in new elements (technology, processes, information and behavioural constructs) for successful execution.
The leading global performers using an IPM approach;• Shareacommonunderstandingof
value creation and use clear measures• Setperformancetargetsandcreate
accountability via KPI’s• Establishjointprojectteamswiththe
appropriate mix of functional, supporting and operational resources
• Acknowledgethatfinanceowns performance management metrics
• Linktargetsettingtokeyvaluedriversandexternal markets
• Usewellgovernedtechnologyandinformationplatforms to drive transparency and integration
• Linkindividualrewardstocompanytargets.
An IPM approach will give clarity and confidence in identification and integration of the critical success factors for performance management improvement projects.
Question 4: What next?By identifying a number of performance management improvement initiatives, you take the first step in creating a performance management framework, supported by related processes and systems, information and people. These initiatives will improve your ability to effectively deliver on your strategy.
The key to IPM is integrationDelivering these initiatives using an IPM program will minimise risk and leverage the potential forsynergeticbenefits.Suchbenefitsareonlyrealised when organisations truly understand the interrelated performance management processes in the context of the various work streams.
In addition, a clear vision and shared understanding is vital to guide how the completion of the initiatives will enable genuine business outcomes.
This will provide insight and drive consensus around the scope, priority, dependencies, roadmap and benefit to the organisation.
Getting this right will underpin the overall success of the program and align with your organisation’s vision and the achievement of sustained and profitable growth.
Align leadership and ensure that performance management initiatives start off in the right direction, with confidence.
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Recommended actions
Description
Educate leaders Your leaders need to know that IPM is an approach that will assist the delivery of business outcomes. They need to understand, sponsor and believe in it to ensure success.
Develop or confirm high level IPM vision and scope
Conduct workshops to achieve leadership alignment on the scope and vision.
Undertake an IPM maturity assessment
The output defines the guiding principles and combines quantitative and qualitative data to determine next steps.
Confirm vision, program scope and objectives
Combine the initial hypotheses and maturity assessment outputs to lock-in these items.
Build a prioritised and phased roadmap
Use results from the information gathered above to produce a phased stage roadmap.
Develop high level target architecture
Shouldsupportthevision, and will serve as a reference point for the duration of the program.
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Background
A rigorous IPM program will derisk execution, align the organisation and promote the success of transformation programsOur industry observationsGlobally, many organisations are commencing or are part way through significant investments in finance, risk and operations related processes, data and infrastructure programs. Typical catalysts for change focus on:
• Capitalandriskmanagement• Improvedtransparency• Alignmentofriskandfinanceinformation
and reporting• Reductioninreportingrisk• Eliminationofmanualprocessesandconflicting
information sources• Systemsconsolidation• Flexibilityandenhancedcapabilitytosupport
future growth• Costreduction• Improvementsinforecastingcapability• Fasterresponsetocompetitorandmarketpressure.
Organisations are addressing these issues through different types and styles of transformation programs, however we are seeing some common trends and points of debate emerging:
Common trends we observe include:• Increasing reliance on finance as a business partner,
with finance moving closer to the business,and demands for greater insights from Corporatethrough better understanding of the business
• Annual planning is supported by rollingforecasting processes, with customer centricdrivers being used, and a focus on the abilityto develop forecasts around different scenariosand contingency plans
• Identification of key external and financialmetrics that are directly related to value foruse in forecasting
• Improved insight into liquidity, balance sheetanalysis and risk factors driving transparencyof positions across the business
• Riskinformationincorporatedintomanagement reporting
• Re-designofCOAandgeneralledgertoactaspoint of control across reporting environments
• Central core single version of the truth• SingleConsolidationtoolsetsupporting
multiple sub consolidations – financial andmanagement reporting
• Alignment of lowest common denominator ofreference data supported by calculation engines
• Integrated Financial systems are becomingthe standard with strong data quality, datamanagement and governance functions,processes and tools
• General Ledger and Financial data warehouseare used universally to support reportingrequirements across business functions.
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Points of debate• Establishing agreed upon driver frameworks,
measure definitions across business functions• Changing the communication of strategy or
business outcomes to a value driver basis instead of bottom up development of financial outcomes
• What is the role of Corporate in the transformation process, and how much oversight into the business should exist – what are the roles and responsibilities of corporate and operations
• Ownership and accountability of balance sheet• Impacts of the transformation agenda on shared
services and offshoring models• Group vs. local reporting and consolidation
responsibilities, including the system (Consolidation, GL, DW) that holds the data (finance, risk, operations) and performs consolidation, elimination and reporting
• Rateofvendorsolutionadoption–leadingedgeor proven model
• Build for local flexibility or global standards and integration
• Fat vs thin ledger, and GL vs Finance Data Warehouse approaches and integrity assurance
• Data and process ownership and accountabilities• Reportingtransparencyandanalyticcapability.
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ContextMany organisations are now attempting to transform their businesses to realise their vision and outperform in the market place. These organisations typically initiate a number of transformation programs across the group to create the foundation for this vision.
Successfulexecutionoftheseprogramsiscriticalfordelivering the following types of specific business outcomes:• Ensuringtherightplatformandcapabilityexists
to accommodate planned and expected growth• Equippingthebusinesstomakefaster,
more accurate decisions in response to marketplace and regulatory changes
• Providingfitforpurposeintegratedsystemsandprocesses to support business outcomes
• Providingaviewofbusinessandfinancialperformance that incorporates risk, finance, treasury and critical business information
• Achievingoperationalefficiencies,facilitatepost-merger integration activities and drive quantifiable benefit to the organisation
• Ensuringthatthepeopleandorganisationalconstructs are in place to adopt these changes and drive the delivery of the required business outcomes.
This Deloitte point of view highlights the key considerations for successful implementation of an Integrated Performance Management approach.
In addition, based on leading practice IPM approach to enabling change, we have noted some areas for consideration to help deliver critical business outcomes.
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1.1 What is Integrated Performance ManagementIPM is an interrelated set of activities, related to the metrics, processes and systems used to effectively monitor and manage an organisation’s business performance.
It includes nine interconnected business disciplines that are enabled by technology and information, and driven by people and behaviours.
IPM involves aligning an organisation’s approach to managing the business, its planning and reporting processes, its underlying data and systems and establishes the environment and foundation for effective and efficient performance management; and subsequent delivery on business outcomes and operational results.
We represent this using the IPM Wheel. The nine disciplines can be grouped into three performance management domains; Plan, Measure and Intervene.
1 Why is IPM important?
9. Forecasting
1. Strategy
2. Planning
3. Budgeting
4. Operational reporting
5. Management reporting
Business outcomes
6. External reporting
7. Analysis
8. Intervention
Technology
Peo
ple P
rocess
Information
Intervene andadjust activitiesto stay on track
Monitorprogress againstthese plans
Create plans andcapability toexecute on thebusiness outcomesthat drive growth
The IPM process is a continuous cycle; the loop must be closed between Intervene and the next Plan stages. To achieve this, current performance reports (e.g. KPIs, financial reports, project tracking) are reviewed to capture ‘lessons learned’ for use as an input into the next cycle.
Figure 2: The Deloitte IPM wheel
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IPM domain Management discipline Description
PlanThese disciplines include understanding the required business outcomes and conveying the strategy throughout the organisation through operational planning.
Strategy Understand performance drivers or levers, for the operational and strategic business outcomes the organisation requires and define the supporting business imperatives. Establish KPI’s.
Planning Define, develop, prioritise and integrate initiatives that will support the business outcomes defined above.
Budgeting Create annual operating, financial and capital targets based on plans developed and the expected business environment.
MeasureThese disciplines include reporting to external stakeholders, providing operational and management reporting, and analysing and interpreting the results.
Operational reporting Scheduleanddeliverreportsandperformanceindicatorswhich provide business intelligence to address the needs of the organisation at all levels.
Management reporting Once operating results are closed and reported, perform analysis and measurement against targets, including financial, risk and non-financial management information.
External reporting External reporting of financial statements, treasury, tax and investor relations.
Analysis Perform standard and ad-hoc analysis of business operating performance across key operating and performance measures.
InterveneThese disciplines include taking action to minimise the impacts of issues or take advantage of opportunities as well as rewarding employees.
Intervention Reviewandimproveperformancemanagementbasedon analyses of process, technology, information and peoplecomponents.Rewardpeoplewhenperformanceobjectives are met.
Forecasting Creating monthly or quarterly targets, taking into consideration operating results and business environment issues.
9. Forecasting
1. Strategy
2. Planning
3. Budgeting
4. Operational reporting
5. Management reporting
6. External reporting
7. Analysis
8. Intervention
Technology
Peo
ple P
rocess
Information
9. Forecasting
1. Strategy
2. Planning
3. Budgeting
4. Operational reporting
5. Management reporting
6. External reporting
7. Analysis
8. Intervention
Technology
Peo
ple P
rocess
Information
9. Forecasting
1. Strategy
2. Planning
3. Budgeting
4. Operational reporting
5. Management reporting
Businessoutcomes
6. External reporting
7. Analysis
8. Intervention
Technology
Peo
ple P
rocess
Information
9. Forecasting
1. Strategy
2. Planning
3. Budgeting
4. Operational reporting
5. Management reporting
6. External reporting
7. Analysis
8. Intervention
Technology
Peo
ple P
rocess
Information
9. Forecasting
1. Strategy
2. Planning
3. Budgeting
4. Operational reporting
5. Management reporting
6. External reporting
7. Analysis
8. Intervention
Technology
Peo
ple P
rocess
Information
9. Forecasting
1. Strategy
2. Planning
3. Budgeting
4. Operational reporting
5. Management reporting
Businessoutcomes
6. External reporting
7. Analysis
8. Intervention
Technology
Peo
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rocess
Information
IPM disciplines
IPM consists of nine management disciplines, grouped into three domains:
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Underpinning the nine disciplines are four IPM enablers, which, promote effective management and execution of the IPM program.
Enabler Description
Process Well defined, understood and transparent processes provide accurate and consistent information, enables each of the IPM disciplines to complete and connect to the next discipline.
Effective processes will align budgets to required business outcomes, support decision making, and provide forward looking intelligence based on key drivers.
People and organisation
Establish and communicate a common understanding of value drivers in the organisation.
Clear ownership and responsibility for operational results and performance through clear communication and understanding of business outcomes and key drivers.
Reward,appraisalandfeedbacklinkedtobusinessperformanceandtargetstodrivetherightbehaviours.
Training and development on driver based performance management, and the impact this has on behaviour, and execution of the nine IPM disciplines.
Governance bodies to ensure the effective management and integration of the processes.
Technology An Integrated Technology Architecture and Common Information Platform assure accurate, consistent and reliable information through a clear management information and data quality strategy.
Complementary, fit for purpose solutions and applications deployed to support business management and reporting activities.
Information Robust,wellgovernedandtrusteddatasourcesenableconsolidation,integrationandanalysisoftherequired financial, management, risk and other critical information and reports.
Common data definitions and business rules drive integrity into the reported information and metrics that support business performance management.
9. Forecasting
1. Strategy
2. Planning
3. Budgeting
4. Operational reporting
5. Management reporting
6. External reporting
7. Analysis
8. Intervention
Technology
Peo
ple P
rocess
Information
9. Forecasting
1. Strategy
2. Planning
3. Budgeting
4. Operational reporting
5. Management reporting
6. External reporting
7. Analysis
8. Intervention
Technology
Peo
ple P
rocess
Information
9. Forecasting
1. Strategy
2. Planning
3. Budgeting
4. Operational reporting
5. Management reporting
Businessoutcomes
6. External reporting
7. Analysis
8. Intervention
Technology
Peo
ple P
rocess
Information
9. Forecasting
1. Strategy
2. Planning
3. Budgeting
4. Operational reporting
5. Management reporting
6. External reporting
7. Analysis
8. Intervention
Technology
Peo
ple P
rocess
Information
9. Forecasting
1. Strategy
2. Planning
3. Budgeting
4. Operational reporting
5. Management reporting
6. External reporting
7. Analysis
8. Intervention
Technology
Peo
ple P
rocess
Information
9. Forecasting
1. Strategy
2. Planning
3. Budgeting
4. Operational reporting
5. Management reporting
Businessoutcomes
6. External reporting
7. Analysis
8. Intervention
Technology
Peo
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Information
IPM enablers
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These four enablers drive the ability to execute the IPM management disciplines, allowing organisations to attain genuine business outcomes:
IPM domain Business outcomes
Plan • Creates a clear linkage between strategic planning, budgeting and management reporting
• Top-down guidance is provided throughout the organisation• FinanceandRiskcanengageandsupportthebusinessinordertoplan
and budget• Planning and budgeting is completed using standardised and common
approaches across the organisation.
Measure • Management at all levels can understand how the business is performing against plans
• Management reporting is created using organisation wide standard processes and helps create ‘one version of the truth’, with the required insight available
• Financial reporting is created utilising standard processes that are controlled • Business management uses its time to focus on analysing results and not
manipulating information and reports.
Intervene • Allows management the ability to take corrective action, through initiatives and projects required to achieve required business outcomes
• Allows management the ability to update forecasts based on market and economic conditions
• Information learned in these processes is used to update the strategy and next year’s plan and budget, thus enabling the continuous process.
9. Forecasting
1. Strategy
2. Planning
3. Budgeting
4. Operational reporting
5. Management reporting
6. External reporting
7. Analysis
8. Intervention
Technology
Peo
ple P
rocess
Information
9. Forecasting
1. Strategy
2. Planning
3. Budgeting
4. Operational reporting
5. Management reporting
6. External reporting
7. Analysis
8. Intervention
Technology
Peo
ple P
rocess
Information
9. Forecasting
1. Strategy
2. Planning
3. Budgeting
4. Operational reporting
5. Management reporting
Businessoutcomes
6. External reporting
7. Analysis
8. Intervention
Technology
Peo
ple P
rocess
Information
9. Forecasting
1. Strategy
2. Planning
3. Budgeting
4. Operational reporting
5. Management reporting
6. External reporting
7. Analysis
8. Intervention
Technology
Peo
ple P
rocess
Information
9. Forecasting
1. Strategy
2. Planning
3. Budgeting
4. Operational reporting
5. Management reporting
6. External reporting
7. Analysis
8. Intervention
Technology
Peo
ple P
rocess
Information
9. Forecasting
1. Strategy
2. Planning
3. Budgeting
4. Operational reporting
5. Management reporting
Businessoutcomes
6. External reporting
7. Analysis
8. Intervention
Technology
Peo
ple P
rocess
Information
9. Forecasting
1. Strategy
2. Planning
3. Budgeting
4. Operational reporting
5. Management reporting
6. External reporting
7. Analysis
8. Intervention
Technology
Peo
ple P
rocess
Information
9. Forecasting
1. Strategy
2. Planning
3. Budgeting
4. Operational reporting
5. Management reporting
6. External reporting
7. Analysis
8. Intervention
Technology
Peo
ple P
rocess
Information
9. Forecasting
1. Strategy
2. Planning
3. Budgeting
4. Operational reporting
5. Management reporting
Businessoutcomes
6. External reporting
7. Analysis
8. Intervention
Technology
Peo
ple P
rocess
Information
Business outcomes
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1.2 Why take an Integrated Performance Management approachTaking an Integrated Performance Management approach to business change programs improves the quality, agility and relevance of business outcomes across the organisation and brings about focus, integration, alignment and behaviour.
The benefits an organisation will expect include:• Improvedorganisationalagility,improvements
in the ability to respond to business changes, integrate acquisitions or, deal with the impact of regulatory change
• Leadingpracticeandinterconnectedapproachesto management disciplines like planning, budgeting, forecasting, management reporting, external reporting
• Focusonthevalueaddinginitiativesthatare aligned with desired business outcomes, bringing about improved decision-making and focus on forward-looking enterprise direction through better understanding of the most relevant information
• Organisationalandbehaviouralconstructsdeveloped with incentives, reward and learning and development linked to business outcomes and their drivers
• Therightsystemsinplacedoingtheappropriatejob, in the best way to deliver insight, compliance, analysis and other information as required
• Technologyplatformsandinformationavailableand governed with consistent quality, granularity and availability to support the business, and performance management processes
• Financialperformancelinkedtoriskmanagement and enterprise governance
• Acomprehensivereportingstrategy,thatstartswith the right KPI’s and dashboards being in place to focus on value drivers
• Onetrustedversionofthetruthacrossfinance,risk and treasury and other business units.
1.3 What are the risks of not taking an IPM approachWhere organisations do not use an IPM approach they fail to integrate the various streams of work or to make connections across the organisation. This results in significantly higher risk of failure and, at best, delivers sub-optimal outcomes across disparate project streams, seriously limiting the overall effectiveness of the program.
Working with various large global organisations, we’ve identified a set of symptoms resulting from tackling IPM components in isolation. These symptoms will exacerbate risk of program failure:• Poorunderstandingofthestrategy,business
outcomes, goals and performance levers across the business
• Long-rangeplanningactivitynotconnectedtothe desired business outcomes
• Organisationalmisalignmentofobjectives,initiatives, resources and individual targets
• Inefficientbudgetingprocess• Failureofreportingandanalysistohighlight
issues in a timely and accurate manner• Behaviournotalignedandlinkedto
organisational performance goals• Dataexistsacrossmultiplesystemswithout
a standard set of business definitions across the enterprise.
These are classic execution issues resulting from the complexity of multiple streams operating in isolation leading to siloed activity.
IPM provides organisations with the ability to address these symptoms at the root cause level, optimising project outputs and driving to the desired business outcomes.
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2 How to implement IPM?
Organisations should take the following steps to define the scope of their approach to effectively implement an Integrated Performance Management program.
2.1 Establishing guiding principles and educating your leadersIt is important to start at the top, engaging business leaders and establishing a strong foundation built on guiding principles.
This creates the right environment upon which a successful program of initiatives and activities can be developed.
While there is no master list of guiding principles that can be applied as a template across all organisations, there is commonality in the types of questions that a company should ask in order to establish its own IPM program guiding principles. Done correctly, this will shape the scope, vision and implementation approach for delivery a successful IPM program.
The questions below help build the guiding principles for each organisations IPM program, and the answers inform the creation of the IPM roadmap and defines the vision and scope:
Leveraging proven IP tailored by applying established guiding principles and testing with an IPM maturity assessment model that will guide where to start and how to proceed delivering efficiencies and quality assurance
Focus Alignment Integration Behaviour
IPM guiding principles
IPM vision
IPM scope
Do we have a shared understanding of what drives value creation across our organisation.
Have we identified and understood the value drivers of our business.
Do we measure the right KPI’s – is the data available at the right level in the organisation.
Do we plan on a value driver basis can we measure execution against what we plan.
Are targets based on value drivers cascaded through the organisation.
Are our projects and initiatives linked to value drivers and business outcomes.
Do our executive, divisional and business unit leaders have clear accountability and control.
Are metrics available and aligned with KPI’s.
Are finance, risk, IT, HR, and business management working together as enabling business partners, with systems and processes in place to assist planning, delivery, measurement, analysis and intervention and of business initiatives and outcomes.
Are the planning, measuring and intervention processes interlinked.
Is there an integrated technology, data and reporting strategy in place.
Are reward mechanisms aligned with business value drivers and initiatives.
Can we deploy and develop the right talent to drive business performance across our business.
What will be the impact on our people of changing to a performance management culture around business outcomes.
Do our people all know and understand the reason we focus on value drivers and measurement.
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The benefits here are: • Theprocessofcommunicationandjoint
discovery will engage the executive, divisional and business unit leaders creating alignment
• Buildingacommonunderstandingofthenine management disciplines accelerating organisational engagement
• Definethescopeofactivitiesrequiredtoenablechange of this type and magnitude
• Promotesleadingpracticebenchmarking, which facilitates realistic prioritisation and target setting.
2.1.1 A further input into establishing guiding principles comes from a high level assessment of how your organisation compares with leading practice across the nine IPM management disciplines:
2.2 The Deloitte IPM maturity assessment tool The next step in implementing an IPM program, is to conduct an objective assessment of current maturity (scored across the nine management disciplines and four enablers) against the desired future state, thereby defining the gap.
Deloitte’s IPM Maturity assessment tool can assist organisations to understand their current capabilities and create a roadmap for bridging the gap. It does so by defining a fully integrated process for program execution, utilising the nine interrelated management processes.
2.2.1 What does it enable?The maturity assessment tool and resulting gap analysis provides the confidence and clarity required to accelerate the IPM program. Specificacceleratorsinclude:• Theinformationandbuy-inrequiredtodevelop
a strategy execution process – with supporting priorities and focus areas
• Anon-prescriptive,integratedframeworkthat achieves a balance of people, process, technology and information changes across all aspects of the program
• Developmentofaprocessforevaluatingandmonitoring internal initiatives from both a strategic and tactical perspective
• Educationoftheorganisationonitscurrentcapabilities, required new capabilities, and a roadmap for improvement
• Promotethealignmentandacceptanceofperformance measures and business goals by stating them as specific metrics that are meaningful to employees.
Common practice Leading practice
Unconnected processes delivering inaccurate and disparate information
Creating actionable insights to achieve business outcomes
Manipulation of data and reports
Time for analysis on single source of truth
Disparate and inconsistent initiatives
Standardisedapproaches in line with strategy on a rolling basis
Informal framework and uncertainty around measures and KPI’s
Technology and behaviour aligned with business outcomes
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2.2.2 How does the maturity assessment work?Each of the nine IPM processes (the components of our IPM wheel) is aligned with the four enablers; Process, People, Technology and Information. Each combination (of management process and enabler) produces of a number of key principles.
The key principles are distilled into five maturity stages, from which we define current and desired future states.
Strategy
Planning
Budgeting
Operational reporting
Management reporting
External reporting
Analysis
Intervention
Forecasting
Maturity stages examples
Process
Process
Four capability enablers
9 pe
rfor
man
ce m
anag
emen
t pr
oces
ses
People Technology Information
Overall planning process
Annual planning process is limited or not well defined.
Strategic initiatives are identified, analysed, prioritised and approved annually. Approval is implicit as part of the approval of the capital and operating budget.
Strategic initiatives are identified, analysed, prioritised and approved annually as part of the planning and budgeting process. The concept of a corporate reserve (i.e. unallocated budget) may be used to facilitate this.
Strategic initiatives are identified, analysed, prioritised and approved annually as part of the planning and budgeting process and revisited throughout the year as necessary.
The process of identifying, analysing, prioritising and approving strategic initiatives is on-going and closely linked to the business’ strategic plan.
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3.1 4.9
Criterion Stage 1Nonexistent
Stage 2Developing
Stage 3Defined
Stage 4Advanced
Stage 5Leading
Actualstage
5
Desiredstage
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Outcomes of the maturity assessment provide:• Clarityofthecoreenablersunderlyingeach
management process• Thescaleonwhichthematurityofan
organisation is assessed (from nonexistentto leading practice)
• Theprogressionrequiredtowardsachievingthe maturity desired across each of thenine IPM management disciplines.
2.2.3 Capability Maturity ModelThe output of the maturity assessment is a robust Capability Maturity Model.
The Capability Maturity Model provides an organisation with the information it needs to complete establishment of the IPM framework:• Focusonrelevantandmeaningfulinitiatives• Aprioritisedroadmapforactionand
gap resolution• AfinalisedvisionandscopefortheIPMprogram• Acontinualprocessimprovementframework
moving the organisation towards leadingIPM practice over a number of years
• Theinputrequiredtoestablishatargetarchitecture.
In an ideal environment, organisations can resolve root-cause issues and challenges with minimal regard for resources, time, and strategic constraints.
In the real world, organisations need to balance enablement initiatives against these constraints to determine the logical sequence and dependency of initiatives.
2.3 The resultFollowing the approach outlined in this section leads to establishing a strong IPM framework for successful delivery of an IPM program. In our experience, organisations typically take between three and nine months to move from establishing leadership commitment, to establishing a prioritised and phased roadmap for the program and target architecture
Leadership commitment
Organisational congruency
Guiding principles
Vision
Scope
Prioritised and phased roadmap
Target state architecture
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3 What are the critical success factors for IPM?
Adopting an IPM approach gives clarity and confidence in the identification and integration of the critical success factors into the programIn our experience, successful IPM projects are characterised by the quality of the leadership team, an experienced execution partner and the deployment roadmap.
Commitment of the leadership team is the key to success. The leaders need the mettle to tackle a program of this type, adhering to the guiding principles and the discipline and to stay the course.
It is imperative that focus, alignment, integration and behaviour are congruent and consistent. The vision and scope of the IPM program must be communicated clearly and accepted across the organisation.
Offsite workshops have proven to be the best forum for achieving this. Questions such as those posed in section 2.1 Establish Guiding Principles can be debated and agreed with plans developed for how to best engage the organisation.
An experienced execution partner brings objectivity and insights from other organisations, together with a deep practical understanding of the IPM approach.
Partner experience is invaluable as often it is the seemingly ‘simple’ items that cost the uninitiated significant time, focus and effort to resolve. This experience helps organisations to answer questions such as: how do we define ‘active customer’? and how do we measure ‘net interest margin’?
Partner guidance is also critical in helping organisations to establish the baseline, guiding principles and approach for the program. They must be able to provide you with expert advice around the best practices of each of the nine management disciplines and how to leverage the critical enablers, (technology and information, process and people) for each of these disciplines.
Although these enablers are overarching, their specific configuration may be unique for each performance management discipline. Expert advice (via a team of dedicated performance management professionals) can provide insights on the best practices for each of these disciplines.
Finally, the output of the IPM maturity assessment enables organisations to draw up a deployment plan for moving to leading IPM practice. This plan, accelerated by a proven toolkit, encourages cross-functional thinking and ensures an integrated architecture, avoiding point solutions, and the deployment of common tools.
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The plan specifically addresses the critical success factors in providing:• ConsensusaroundKPI’sandmetrics;essential
for a smooth, successful delivery.• Commitmentandproactivecommunication
by the senior sponsors driven through team workshops educating and aligning the leadership team on the guiding principles for the project
• Averyclearunderstandingofthebusinessrequirements and the intent of the change program – regardless of whether or not it is implemented within the IPM framework. Qualitative and quantitative benefits can be identified and tied to specific business outcomes
• Amplequantitativeandqualitativeinformationfocussing on the right value drivers, measures and dashboards to inform decisions and effectively monitor progress towards the business outcomes
• Aclearviewofthecurrentorganisationalstateincluding technology and information landscape, performance management stakeholders, data and technical architecture
• Recognitionoftheneedforadeepunderstanding of the business requirements of the change program and the IPM approach.
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4 Next steps
4.1 Our observationsFrom our conversations with clients, we understand they intend to put in place processes and systems to better support growth strategies, reduce operational costs and risk, improve capital optimisation and streamline operations. A number of initiatives, or streams of work are usually created that will help with the realisation of these objectives.
We typically map our clients initiatives to each of the nine disciplines and enablers of the IPM approach. From here we can quickly see if all the relevant components are represented in our clients planned approach. Often times there is a lack of integration apparent and also key enablers missing from the program.
Doing IPM the right way forces an alignment, integration and focus across initiatives in IPM programs. A well-executed approach will ensure you move in the right direction with confidence
9. Forecasting
1. Strategy
2. Planning
3. Budgeting
4. Operational reporting
5. Management reporting
Business outcomes
6. External reporting
7. Analysis
8. Intervention
Technology
Peo
ple P
rocess
Information
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4.2 Where should you beginIn our experience, consecutively (or in some cases simultaneously) executing multiple interrelated performance management initiatives can provide a vast impact for an organisation and make big contributions towards achieving your desired business outcomes.
However, this also brings about complexity around managing and sequencing the various interrelated work streams. In the face of these challenges, and without a structured approach used to identify and execute the various initiatives or work streams, we see otherwise experienced organisations achieve poor outcomes at substantial cost that largely fail to deliver the business outcomes expected.
To use an example, we often see a significant number of Performance Management disciplines supported by one ‘piece’ of technology across an organisation. The solution becomes ‘stretched’, potentially constraining your ability to report internally, externally, provide business insight efficiently and integrate with budget and forecast, risk and treasury information.
In this case, it would seem logical to propose that a company focuses their early IPM program effort on resolving this issue. Instead, our experience recommends conducting a maturity assessment across all nine performance management disciplines and IPM enablers to get a quantitative understanding of your current and desired positions.
The difference between the current and desired state will highlight the priority of these issues in the context of the overall enablement program, and also assist in creation of an appropriate target architecture to support the desired state.
Further, the priority of initiatives will be confirmed, by using the IPM framework in the context of any other gaps in the discipline enablers that the maturity assessment tool provides us with insight on. We often stress the fact that the size of the gap, times importance, equals priority.
With this in mind, we believe that organisations benefit enormously from conducting the following activities at the onset of an IPM initiative:
1. Conduct workshops to establish guidingprinciples and educate leaders on what takingan IPM approach to the EE program means,including establishment of guiding principlesand confirmation of high level scope and vision.
2. IPM Maturity Assessment to finalise vision,scope and a prioritised implementaiton roadmap,including target architecture for the IPM program.
Contact us
DeloitteGrosvenor Place, 225 GeorgeStreet, Sydney,New South Wales, Australia
Tel: +61 2 9322 7000 Fax: +61 2 9322 7001
www.deloitte.com/au/cpm
Paul WensorDeloitte Consulting Tel: +61 3 9671 7067Mobile: +61 432 395 733 [email protected]
Scott TaylorDeloitte Consulting Tel: +61 3 9671 7677Mobile: +61 407 137 364 [email protected]
Tony Trewhella Deloitte ConsultingTel: +61 2 9322 5668Mobile: +61 407 367 857 [email protected]
This publication contains general information only, and none of Deloitte Touche Tohmatsu Limited, its member firms, or their related entities (collectively the “Deloitte Network”) is, by means of this publication, rendering professional advice or services.
Before making any decision or taking any action that may affect your finances or your business, you should consult a qualified professional adviser. No entity in the Deloitte Network shall be responsible for any loss whatsoever sustained by any person who relies on this publication.
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Deloitte provides audit, tax, consulting, and financial advisory services to public and private clients spanning multiple industries. With a globally connected network of member firms in more than 150 countries, Deloitte brings world-class capabilities and high-quality service to clients, delivering the insights they need to address their most complex business challenges. Deloitte has in the region of 200,000 professionals, all committed to becoming the standard of excellence.
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